Are Shareholders Finally Getting Justice?

Judge Emmet G. Sullivan on Wednesday accepted the settlement between prosecutors and Barclays PLC in a case stemming from alleged altering of financial records to hide the movement of funds into the U.S. from Iran, Cuba and other prohibited countries. But he wasn’t in love with it. Judge Sullivan had called the settlement a “sweetheart deal.”

Sullivan is the latest judge to question or throw out settlements with Wall Street firms, a trend that’s shaking up the financial legal community and regulators who have counted on the judicial rubber stamp for their sue-and-settle blueprint for regulatory action. Deals between the government and Bank of America Corp. and Citigroup Inc. were scuttled over concerns about shareholders getting penalized twice.

Under the accepted system “it is the shareholders who were ordered to do penance. And even if it is assumed that is part of the territory that comes with stock ownership, (Former SEC Assistant Regional Director) Robert Heim said judges are concerned regulatory settlements don’t have the deterrent effect stiffer penalties against individuals would have.”

“Institutions often get nicked for the transgressions of individuals. This pattern has served everyone well. Individuals keep their jobs and even their reputations. Institutions are better prepared to absorb financial penalties. Prosecutors get the spoils of attacking institutions with big fines often helping to buttress budgets and make splashy headlines.”

And even though Judge Sullivan ultimately accepted the Barclays settlement, he had concerns. He wondered whether the public would think Barclays was getting a “free ride” and added “it’s proceedings like these that raise concerns in the public’s mind about fairness and justice.”

Comments (1 of 1)

Of course the public wonders if (is sure that) a double standard exists. Let's say that I were to pad my losses on an insurance claim and the was caught doing it. My expectation as an individual is that I would feel the full impact of both civil and crimainal law. While I might be able to plea bargain my way out, the blemish would remain. I would not have the option of paying a penalty while being able to legally maintain that I did nothing wrong.

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